The withdrawal rules of the Sukanya Samriddhi Account has been modified with effect from March 18th 2016. Thanks to Muthu Krishnan for alerting me about it. They are discussed in this post in case you missed them like I did.
Old withdrawal rule: (Source: Gazette of India 2nd December 2014)
To meet the financial requirements of the account holder for the purpose of higher education and marriage, withdrawal up to fifty per cent. of the balance at the credit, at the end of preceding financial year shall be allowed only when the account holder girl child attains the age of eighteen years.
New withdrawal rule (GOI Gazette dated March 16th 2016)
(1) Withdrawal of up to a maximum of fifty per cent of the balance in the Account at the end of the financial year preceding the year of application for withdrawal, shall be allowed for the purpose of higher education of the Account holder: Provided that such withdrawal shall not be allowed unless the Account holder attains the age of eighteen years or has passed tenth standard, whichever is earlier.
(2) The application for withdrawal under sub-rule (1) shall be accompanied by a documentary proof in the form of a confirmed offer of admission of the Account holder in an educational institution or a fee slip from such institution clarifying such financial requirement.
(3) The withdrawal under sub-rule (1) may be made as one lump sum or in instalments, not exceeding one per year, for a maximum of five years, subject to the ceiling specified in sub-rule (1): Provided that the amount of withdrawal shall be restricted to the actual demand of fee and other charges required at the time of admission as shown in the offer of admission or the relevant fee-slip issued by the educational institution.
Old Closure Rule
13. Closure on maturity .- (1) The account shall mature on completion of twenty-one years from the date of opening of the account : Provided that where the marriage of the account holder takes place before completion of such period of twentyone years, the operation of the account shall not be permitted beyond the date of her marriage : Provided further that where the account is closed under the first proviso, the account holder shall have to give an affidavit to the effect that she is not less than eighteen years of age as on the date of closing of account.
New Closure Rule
(1) The Account shall mature on completion of a period of twenty-one years from the date of its opening: Provided that the final closure of the Account may be permitted before completion of such period of twentyone years, if the account holder, on an application, makes a request for such premature closure for reasons of intended marriage of the Account holder and on furnishing of age proof confirming that the applicant will not be less than eighteen years of age on the date of marriage: Provided that no such premature closure shall be made before one month preceding the date of the marriage or after three months from the date of such marriage.
(2) On maturity, the balance including interest outstanding in the Account shall be payable to the Account holder, on an application by the Account holder for closure of the Account, and on furnishing documentary proof of her identity, residence and citizenship.
(3) No interest shall be payable once the Account completes twenty-one years from the date of its opening.
First, let us consider the changes:
1) Many children enter college before the age of 18. Earlier 50% withdrawal could be made only upon completion of 18. Now completing 10th standard is enough. Note: withdrawals cannot be made after 10th std! Documentary proof of college admission is necessary. This is a welcome change for parents who opened the account without considering the age of entry in college.
2) Withdrawals can be made in one-shot or in 5 installments. Considering that only 50% of the account balance can be withdrawn, much of it will be used of paying the admission and 1st-year college fees. So this may not be of much use.
3) Withdrawal of 50% is the maximum allowed. If the admission fee slip shows a lesser amount then only that much can be withdrawn. Considering the cost of education inflation, this restriction may not matter much. The expense is likely to be much higher than the 50% limit!
4) premature closure upon marriage will require the following documents
(a) age proof (need to above age 18)
(b) Premature closure can only be made one month before marriage and within 3 months from date of marriage. The invitation would be necessary for proof.
This is a major disadvantage because at least 50% of expenses will be made before 1 month of marriage.
(c) Account will remain dormant after 21 years from date of opening. Earlier one could leave it alone and get interest!
I have made it clear in several posts that the Sukanya Samriddhi Account is unsuitable for a child’s education. As of now it is unsuitable for the marriage goal as well! If you have a girl child, open an account and use it as part of the debt portfolio for your retirement! See: Sukanya Samriddhi Yojana vs PPF: An Illustration